World events and surreptitious activities have increased the need to “Know Your Customer” in order to minimize risks associated with conducting business with, or on behalf of, a particular person or organization. The present invention focuses on ascertaining and managing risks associated with a geo-political area, such as a country, region or a street address.
As money-laundering and related concerns have become increasingly important public policy concerns, regulators have attempted to address these issues by imposing increasing formal and informal obligations upon Risk Bearing Institutions. Government regulations authorize a broad regime of record-keeping and regulatory reporting obligations on covered Risk Bearing Institutions as a tool for the federal government to use to fight drug trafficking, money laundering, and other crimes. The regulations may require Risk Bearing Institutions to file currency and monetary instrument reports and to maintain certain records for possible use in tax, criminal and regulatory proceedings. Such a body of regulation is designed chiefly to assist law enforcement authorities in detecting when criminals are using banks and other Risk Bearing Institutions as intermediaries for, or to hide the transfer of funds derived from, criminal activity.
Obligations include those imposed by the Department of the Treasury and the federal banking regulators which adopted suspicious activity report (“SAR”) regulations. SAR regulations require that Risk Bearing Institutions file SARs whenever an institution detects a known or suspected violation of federal law, or a suspicious transaction related to a money laundering activity or a violation of the Bank Secrecy Act (“BSA”). The regulations can impose a variety of reporting obligations on Risk Bearing Institutions. Perhaps most broadly relevant for the present invention, current regulations require a Risk Bearing Institution to report transaction which aggregate to $5,000 and which involve potential money laundering or violations if the institution, knows, suspects, or has reason to suspect that the transaction involves funds from illegal activities, is designed to disguise such funds, has no business or legitimate purpose, or is simply not the sort of transaction in which the particular customer would normally be expected to engage, and the institution knows of no reasonable explanation for the transaction after examining the available facts.
Federal regulators have made clear that the practical effect of these requirements is that Risk Bearing Institutions are subject to significant obligations to “know” their customer and to engage in adequate monitoring of transactions.
Bank and non-bank Risk Bearing Institutions, including: investment banks; merchant banks; commercial banks; securities firms, including broker dealers securities and commodities trading firms; asset management companies, hedge funds, mutual funds, credit rating funds, securities exchanges and bourses, institutional and individual investors, law firms, accounting firms, auditing firms, any institution the business of which is engaging in financial activities as described in section 4(k) of the Bank Holding Act of 1956, and other entities subject to legal and regulatory compliance obligations with respect to money laundering, fraud, corruption, terrorism, organized crime, regulatory and suspicious activity reporting, sanctions, embargoes and other regulatory risks and associated obligations, hereinafter collectively referred to as “Risk Bearing Institutions,” typically have few resources available to them to assist in the identification of present or potential risks associated with business transactions.
Generally, compliance officers and other Risk Bearing Institution personnel have few resources available to assist them with the identification of present or potential global risks associated with a particular investment or trading transaction. Risks can be multifaceted and far reaching. The amount of information that needs to be considered to evaluate whether an international entity poses a significant risk or should otherwise be restricted, is substantial.
However, Risk Bearing Institutions do not have available a mechanism which can provide real time assistance to assess a risk factor associated with an international transaction, or otherwise qualitatively manage such risk. In the event of investment problems, it is often difficult to quantify to regulatory bodies, shareholders, newspapers and/or other interested parties, the diligence exercised by the Risk Bearing Institution to properly identify and respond to risk factors. Absent a means to quantify good business practices and diligent efforts to contain risk, a Risk Bearing Institution may appear to be negligent in some respect.